Key Documents

Zeek receiver outlines claims process

Published: Thursday, January 31, 2013 at 9:28 p.m.

Last Modified: Thursday, January 31, 2013 at 9:28 p.m.

Hundreds of thousands of people who lost money through the alleged Ponzi scheme, Zeek Rewards, may soon be able to stake their claims.

Case receiver Kenneth Bell said he intends to file a motion approving the claims process by the end of the first quarter of 2013, according to a final liquidation filed in federal court in Charlotte on Thursday.

Bell hopes to make a final distribution by the end of 2014, according to the filing.

It's estimated that about 840,000 users lost money through Zeek Rewards, one of the first penny auction-based companies to present profit sharing to its customers. The U.S. Securities and Exchange Commission shut down the operation on Aug. 17, claiming the program raised more than $600 million from one million worldwide users through the offer and sale of unregistered securities.

Bell, a partner with McGuireWoods in Charlotte, has collected about $312 million to date, mostly from financial institutions and outstanding cashier's checks. The receivership team is also pursuing up to $7 million from e-wallets affiliates used to funnel money in and out of the program. The team is also seeking funds held in foreign accounts, including one account that holds, or held, about $12 million, according to the filing.

In addition, Bell is targeting about 80,000 Zeek Rewards users who profited from the program. He estimates that about $295.5 million could have been "fraudulently transferred" to the program's "net winners," who are subject to "claw back" litigation.

Bell said once the claims process is approved by a judge later this year, an online claims submission process should commence within 14 days. He said he will request that all claims be filed within 120 days of the order approving the process.

Once filed, the receivership team will review claims and compare them to Zeek records. Based on the review, the team will either approve or dispute a claim, according to the filing. If there is a dispute, the team will seek to resolve the conflict by engaging with the claimant in good faith.

Bell has said in recent months he doubts all affiliates will be repaid in full.

In the program, affiliates bought in with Zeek Rewards by purchasing one of three monthly subscription plans for $10, $50 or $99. That subscription provided them a "back office" and enabled them to purchase up to $10,000 in bids for the penny auction site, Zeekler.com, which was also administered by Rex Venture Group.

To earn a profit, affiliates were required to give their bids to new customers and post a daily advertisement for the site online. For purchasing a subscription, buying bids, giving them away and placing an ad, affiliates got to share in the daily profits from Zeekler.com through rewards called "profit points" — bonuses they could compile over time and eventually turn into cash.

Bell said affiliate claims should be based on the amount of cash the individual paid into the program, not the amount of profit points each retained, according to the filing.

According to a screenshot of a potential online claims process, claimants will use their Zeek Rewards login information to register with the system. Claimants will be able to select whether they are an affiliate, vendor, independent contractor, former employee or another subject who lost money. Then, they will make their detailed claim.

For more information, go to www.zeekrewardsreceivership.com.

Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.

<p>Hundreds of thousands of people who lost money through the alleged Ponzi scheme, Zeek Rewards, may soon be able to stake their claims.</p><p>Case receiver Kenneth Bell said he intends to file a motion approving the claims process by the end of the first quarter of 2013, according to a final liquidation filed in federal court in Charlotte on Thursday. </p><p>Bell hopes to make a final distribution by the end of 2014, according to the filing.</p><p>It's estimated that about 840,000 users lost money through Zeek Rewards, one of the first penny auction-based companies to present profit sharing to its customers. The U.S. Securities and Exchange Commission shut down the operation on Aug. 17, claiming the program raised more than $600 million from one million worldwide users through the offer and sale of unregistered securities.</p><p>Bell, a partner with McGuireWoods in Charlotte, has collected about $312 million to date, mostly from financial institutions and outstanding cashier's checks. The receivership team is also pursuing up to $7 million from e-wallets affiliates used to funnel money in and out of the program. The team is also seeking funds held in foreign accounts, including one account that holds, or held, about $12 million, according to the filing.</p><p>In addition, Bell is targeting about 80,000 Zeek Rewards users who profited from the program. He estimates that about $295.5 million could have been "fraudulently transferred" to the program's "net winners," who are subject to "claw back" litigation.</p><p>Bell said once the claims process is approved by a judge later this year, an online claims submission process should commence within 14 days. He said he will request that all claims be filed within 120 days of the order approving the process. </p><p>Once filed, the receivership team will review claims and compare them to Zeek records. Based on the review, the team will either approve or dispute a claim, according to the filing. If there is a dispute, the team will seek to resolve the conflict by engaging with the claimant in good faith.</p><p>Bell has said in recent months he doubts all affiliates will be repaid in full.</p><p>In the program, affiliates bought in with Zeek Rewards by purchasing one of three monthly subscription plans for $10, $50 or $99. That subscription provided them a "back office" and enabled them to purchase up to $10,000 in bids for the penny auction site, Zeekler.com, which was also administered by Rex Venture Group.</p><p>To earn a profit, affiliates were required to give their bids to new customers and post a daily advertisement for the site online. For purchasing a subscription, buying bids, giving them away and placing an ad, affiliates got to share in the daily profits from Zeekler.com through rewards called "profit points" — bonuses they could compile over time and eventually turn into cash.</p><p>Bell said affiliate claims should be based on the amount of cash the individual paid into the program, not the amount of profit points each retained, according to the filing.</p><p>According to a screenshot of a potential online claims process, claimants will use their Zeek Rewards login information to register with the system. Claimants will be able to select whether they are an affiliate, vendor, independent contractor, former employee or another subject who lost money. Then, they will make their detailed claim. </p><p>For more information, go to www.zeekrewardsreceivership.com. </p><p>Nash Dunn can be reached at 249-3981, ext. 227, or at nash.dunn@the-dispatch.com.</p>